Business
Core Competencies
Core competencies refer to the unique strengths and capabilities that set a business apart from its competitors and contribute to its competitive advantage. These are the collective knowledge, expertise, and skills within an organization that enable it to deliver value to customers and outperform rivals. Identifying and leveraging core competencies is essential for strategic decision-making and sustainable business success.
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8 Key excerpts on "Core Competencies"
eBook - PDFWinning Market Leadership
Strategic Market Planning for Technology-Driven Businesses
- Adrian Ryans, Roger More, Donald Barclay, Terry Deutscher(Authors)
- 2010(Publication Date)
- Wiley(Publisher)
In the next section of this chapter, Core Competencies, which are unique sets of resources and capabili-ties, will be discussed. Particular attention must be paid to them, because they may well be the basis for winning market leadership. Furthermore, they have strategic implications that go beyond evalu-ation of the current opportunity. Fit is derived from the match between a firm’s strategy, which is necessarily based on its resources and Core Competencies, and the requirements for achieving success by meeting customer needs in the marketplace. In a subsequent section of the chapter, assessment of fit will be discussed using an example from the cancer treatment area. Competitive differentiation is a concept that describes how well your resources and competencies, and your strategy which employs them, fit the opportunity relative to another competitor. Ultimate-ly, the size of your firm’s competitive differentiation determines how much of the business in a market opportunity you can win, and how much of the pool of potential profit from the opportunity you can win. Core Competencies play a significant role in determining com-petitive differentiation. Core Competencies What Is a Core Competency? A core competency is a unique and integrated set of resources and capabilities that allows a firm to perform some critical process better than any of its competitors, creating differentiated value for its cus-5 Assess Resources and Competencies 105 tomers. 1 The core competency can be applied to a number of oppor-tunities over time to produce profit. There are three key elements to this definition. A Unique and Integrated Set of Resources and Capabilities A core competency is not a single strategic skill, but rather it is mul-tidimensional. It is a unique combination of skills and resources, with particular emphasis on people’s skills, knowledge, and collective learning.
eBook - PDFFrom Knowledge Management To Strategic Competence: Measuring Technological, Market And Organisational Innovation (Second Edition)
Measuring Technological, Market and Organisational Innovation
- Joe Tidd(Author)
- 2006(Publication Date)
- ICP(Publisher)
In essence, they argue that: (i) The sustainable competitive advantage of firms resides not in their products, but in their Core Competencies : “The real sources of advantage are to be found in management’s ability to consolidate corporate-wide technologies and production skills into competencies that empower individual businesses to adapt quickly to changing opportunities” (1990: 81). This approach to strategic management is also known as “resource-based” or “capabilities-based”, although there are subtle differences in focus and interpretation. (ii) Core Competencies feed into more than one core product which, in turn, feed into more than one business unit. They use the metaphor of the tree, where Core Competencies are the roots and the end products and services are the leaves, flowers and fruits. This suggests that the most appropriate level of analysis and investment is neither the product nor the market, but the Core Competencies. (iii) Core Competencies require focus : “Few companies are likely to build world leadership in more than five or six fundamental competencies. A company that compiles a list of 20 to 30 capabilities has probably not produced a list of Core Competencies.” (1990: 84). This suggests that competencies represent a coherent cluster or aggregation of assets, knowledge and skills, and are much more than organisational “strengths” or “weaknesses”. They suggest three acid tests for a competence: it adds value to end products; applies to a range of different markets; and is difficult to develop and imitate. (iv) The identification and development of a firm’s Core Competencies depends on its s trategic architecture , defined as: “a road map of the future that identifies which Core Competencies to build and their constituent technologies…should make resource allocation priorities transparent to the whole organisation…Top management must add value by enunciating the strategic architecture that guides the competence acquisition process” (1990: 89).
- Y. Wang, R. Li-Hua(Authors)
- 2006(Publication Date)
- Palgrave Macmillan(Publisher)
In fact, the resource-based view allows each action to be refer- enced to the satisfaction of customer needs; in other words, to the delivery of value (Hamel and Prahalad, 1989; Chiesa and Barbeschi, 1994) and believes that superior performance is based on the dynamic competence building and leveraging process. Thus, superior customer- focused performance could be achieved through a set of interlinked business processes and coordination of strategic resources whose goal is to satisfy customer needs with higher service/product quality and superior customer-perceived value. Such key determinants of perform- ance as customer care, structure change, marketing effort, reputation, organizational redesign, distribution strength and staff skills (Petroni 2000) can all be reflected by the strategic resources and core competence of the firm as shown in Figure 4.1. It is the close interaction of these factors such as organizational learning (commitment, shared vision and open-mindedness), core competences (integrative competences, market competences and technological competences) and strategic flexibility (resource flexibility, coordination flexibility, excess resources and the ability to profit from diversity and changes) that lay a solid found- ation for the distinctive capabilities of a firm, which are difficult to copy or imitate, and finally determine a firm’s customer-focused performance and its sustainability. Furthermore, the contribution of these intertwined factors to customer-focused performance of a firm
eBook - PDFEnduring Success
What Top Companies Do Differently
- Kurt Matzler, Franz Bailom, D. tschemernjak(Authors)
- 2007(Publication Date)
- Palgrave Macmillan(Publisher)
The results of our study also corroborate this: core competences are decisive in determining corporate success – in two regards. They contribute to effectiveness and efficiency, as competence-based management means jetti- soning ballast and concentrating on those things the company does best. This means concentrating strengths and using resources efficiently. However, core competences also increase corporate success indirectly if innovations in prod- ucts and services consistently build on these unique skills and competences. This realization has far-reaching consequences for the strategy development process: it turns it on its head. The starting point is not the environment and the industry, but rather the company’s own skills and competences: • In the first step, it is necessary to identify the particular strengths of the company. • These strengths are then evaluated to determine whether they are unique, that is to say core competences, and could form the basis for competitive advantages. • The next step involves finding attractive industries and markets in which these core competences can be exploited. • Finally, strategies based on the core competences are developed for these industries and markets and then implemented. Therefore, success is not so much a question of “adapting oneself” as a question of “shaping” (Figure 6.1). The German PAPSTAR group is a company with over 2000 employees which operates Europe-wide and has specialized in distributing disposable bowls and plates, as well as other disposable items, packaging materials, hygiene products, decorative items, and accessories. Using its strong expertise in sourcing and logistics, it purchases over 5000 different items worldwide and bundles them into marketable ranges of goods. In doing this, it attaches particular importance to continually allowing new trends to flow into the design of its product ranges for different customer groups in order to create an optimal integrated solution for retailers.
- Ron Sanchez, Aimé Heene(Authors)
- 2010(Publication Date)
- Emerald Group Publishing Limited(Publisher)
Core competences must be able to disproportionately contribute to the customer-perceived value ( Hamel, 1994 ) through the nature of their link to business goals (i.e., having a far greater number of supporting links to goals than other competences). Exploring this linkage between competences (distinctive or not) and business goals enables a validation of: (i) the utility of the competences, (ii) distinctiveness relative to specified goals, (iii) the distinctiveness of patterns of competences and distinctive competences, and (iv) the goals as being realistic even if aspirational. Invariably TMTs identified what they thought were core competences that turned out to be of little importance in delivering business goals – these were often a part of the legacy of the organization. If the customer or the business does not currently value the Fig. 5b . The Distinctive/Differentiated Strategy Model. COLIN EDEN AND FRAN ACKERMANN 20 consequences of any distinctive competences then there is no competitive advantage. But, if the customer can be persuaded to value the outcomes of a distinctive competence (through particular strategies) then it may create competitive advantage. However, it is important to note that if strategy is developed from customer values first, rather than from seeking to exploit distinctive competences, then it is possible that the exploitation of a distinctive competence might be missed. ‘‘Firms should focus their analysis mainly on their ‘unique’ skills and resources rather than on the competitive environment’’ ( Dierickx & Cool, 1989, p. 1504 ). The above notion of core competence varies from that suggested by Prahalad and Hamel (1990) because it argues that (i) core distinctive competences provide competitive advantage, (ii) core competences are discovered from an analysis of the relationship of competences to goals, and Fig. 5c . Identifying Core Competences. Competences, Distinctive Competences, and Core Competences 21
eBook - PDFInterdisciplinary Behavior and Social Sciences
Proceedings of the 3rd International Congress on Interdisciplinary Behavior and Social Science 2014 (ICIBSoS 2014), 1-2 November 2014, Bali, Indonesia.
- Ford Lumban Gaol(Author)
- 2015(Publication Date)
- CRC Press(Publisher)
Firm performance has traditionally been considered purely in accounting terms, but not today. Most of the consequences of firm-level strategic orientations have been evaluated in terms of overall business-level financial and marketing performance measures, such as sales volume, market share, and financial income etc. (Ramani & Kumar, 2008). 2.2 Core competence and organizational performance Today, firms are in the agile edge of competitive envi-ronments, and the situation drives a firm continuously to strive for ways to get a sustainable competitive advantage. They need to count more on their core competences and internal strengths to achieve com-petitive advantages. Core competence can be defined as the combination of specific assets and organi-zational capabilities. It is the integrated collection of capabilities such as organizational routines and problem-solving skills that distinguish the firm in the marketplace (Hamel & Prahalad, 1994; Heene, 1997). A strategic architecture that reflects a firm’s strate-gic orientation is a road map of the future that identifies which core competence is needed to build (Hamel & Prahalad, 1994). Investments into different assets and competences are guided by firms’ orienta-tion and strategic management deployment. Smirnova et al. (2011) investigated that market orientation is an antecedent of cooperate competence and performance. They demonstrated that the impact of market orien-tation as direct and indirect antecedents of relational competence, and thus subsequently impact on overall firm’s performance. Liang et al.(2013) proved that core competence of firm emerges as an important factor in the per-formance of shopping mall. They focused on the relationship between core competence and financial performance at a shopping mall adjacent to an air-port. Agha et al.(2012) investigated the relationship between core competence, competitive advantage and organizational performance.
eBook - PDFCapabilities for Strategic Advantage
Leading Through Technological Innovation
- D. Birchall, G. Tovstiga(Authors)
- 2005(Publication Date)
- Palgrave Macmillan(Publisher)
Knowledge can therefore be considered to be the firm’s most important strategic resource. Equally important is the firm’s capability to acquire, integrate, store, retrieve, and share knowledge for building and sustaining competitive advantage. Knowledge, Zack (2001) points out, enhances the firm’s fundamental ability to compete. Much of the organization’s strategically relevant knowledge exists in a tacit rather than explicit form (Birchall and Tovstiga 2004a). For the most part, this knowledge resides in the form of people-embedded knowledge. This leaves firms at risk if key personnel are attracted elsewhere. Compet- itive advantage is gained through the deliberate and purposeful manage- ment of the firm’s stock of strategically relevant knowledge. For the most part, the firm’s knowledge is embedded in its portfolio of competencies and capabilities. Competence or capability? The terms competence and capability are sometimes used inter- changeably in the literature. We reserve the term competence for those knowledge-embedded resource bundles that span multiple businesses; that is, their competitive impact extends beyond a single business unit. Thompson and Strickland (2001) go on to differenti- ate between core and distinct competencies. The former are activi- ties the company does well relative to other internal activities; the Capabilities for strategic advantage 22 latter are activities the firm does well relative to its competitors. We prefer to use core to designate those competencies that differentiate a firm competitively across the entire company relative to its competitors. Capabilities, in our terminology, are combinations and bundles of constituent knowledge, skills, and learning accumulated over time. Much of the knowledge embedded in capabilities is tacit in nature, making it difficult to identify and manage. Capabilities typically reside in teams and departments. Clusters of core capabilities constitute the building blocks of Core Competencies.
eBook - PDFStrategy for Sustainable Competitive Advantage
Surviving Declining Demand and China's Global Development
- Ian Chaston(Author)
- 2012(Publication Date)
- Routledge(Publisher)
To overcome this potential problem Chaston and Mangles (1997) used a number of a published studies on competences asso- ciated with business growth to evolve a composite qualitative model sum- marising which key competences were found to be common across various research studies. The model shown in Figure 5.2 provided the basis for a large-scale quantitative study of UK firms in both the manufacturing and services sectors. Discriminant function analysis was applied to the survey data. This permitted the creation of a quantitative model describing how variations in capability can be expected to influence business growth rates. This model demonstrated that there are certain important internal generic competences of a strategic or operational nature that strongly influence business performance. The entry point of the model in Figure 5.2 is the critical capability of the organisation to be able to identify emerging opportunities and to evolve an effective strategic response. This competence will exist only if the leadership has articulated a clear vision for the future and embedded a commitment towards sustained entrepreneurial activity throughout the organisation. Dulewicz and Higgs (2003) have described this leadership competence as Identification of market opportunities Appropriate strategy New product management Effective business plan to exploit opportunities Financial resources to support business operations Continuous innovation approach to improving products and services Workforce with appropriate skills Quality meets expectations of customers Productivity supportive of operations Information systems providing real-time data Financial Resource Strategic Competences Operational Competences Figure 5.2 A qualitative model of organisational competences to support long-term business performance. 78 Strategy for Sustainable Competitive Advantage ‘emotional intelligence.’ In their view this competence requires that the leadership is able to: 1.
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